Developers (General) : En-bloc-sales

Q1: What is the meaning of selling en-bloc?
Q2: How can an en-bloc sale be conducted?
Q3: What are the legal documents involved in an en-bloc sale?
Q4: What are the main steps involved in an en-bloc sale process?
Q5: On the average, how long does the en-bloc sale process take?
Q6: What are some of the principal terms in the Collective Sale Agreement?
Q7: What happens to the deposit paid for an en-bloc sale when only the majority owners have agreed to sell?
Q8: What is required by the Strata Titles Board to approve an en-bloc sale?
Q9: What actually happens before the approval of an en-bloc sale?
Q10: What are some examples of en-bloc sale not done in good faith?
Q11: Under what other circumstances would a collective sale be blocked?
Q12: What happens if there are variations in a term that are not allowed for in the Agreement?
Q13: What are the methods used to distribute sale proceeds?
Q14: How can I ensure that the Development Charge for is unchanged for a site that is due for a review of the Development Charge?

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Note: Please click here for Registra's Circular 1/2004 on new collective (en-bloc) sale procedures from Strata Titless Boards.
Q1: What is the meaning of selling en-bloc?

It means all the owners of separate units in an apartment, condominium or even an office building, band together to collectively sell out their properties to a developer for comprehensive redevelopment.

Q2: How can an en-bloc sale be conducted?

By private treaty, tender or auction.

Q3: What are the legal documents involved in an en-bloc sale?

There are two main legal documents-the Collective Sale Agreement and the Sale and Purchase Agreement. However, if the property is sold by tender, then the latter would take the form of a Tender Document.

Q4: What are the main steps involved in an en-bloc sale process?
a) Phase 1: Pre-Sale Preparation (2 months or more) - Owners come together to agree and sign the Collective Sale Agreement
b) Phase 2: Public Tender Stage (1 month) - Project is up for Public Tender, and developers submit their bids
c) Phase 3: Post Tender (1 month) - Evaluation of bids and negotiations with developers if necessary
d) Phase 4 : Legal Completion (3 months) - There is less than 100% agreement, more time is needed to obtain an order from the Strata Titles Board
Q5: On the average, how long does the en-bloc sale process take?

Generally, it takes about 14 months.

Q6: What are some of the principal terms in the Collective Sale Agreement?
a) Reserve price- the minimum price that owners agree to sell
b) Method of distributing sale proceeds
c) The validity period of the Collective Sale Agreement
d) Date to deliver vacant possession, and how much can be retained by the developer till vacant possession is delivered
e) Whether the sale will be subject to tenancies- where owners cannot agree to sell within a fixed period for vacant possession delivery
f) Indemnities for the Sale Committee and between owners
g) The Sale Committee's authority to sign plans submitted by the authority
h) Provisions for 80% or 90% majority agreement and undertaking to pay all costs relating to the application
Q7: What happens to the deposit paid for an en-bloc sale when only the majority owners have agreed to sell?

During this time, the developer would be awarded a conditional contract concerning the approval from the Strata Titles Board. The deposit paid would usually be held by the vendors' lawyer as stakeholder.

Q8: What is required by the Strata Titles Board to approve an en-bloc sale?
a) For developments that are less than 10 years old- the subsidiary proprietors with not less than 90% of share values must agree to sell
b) For developments of 10 years or more- the subsidiary proprietors with not less than 80% of share values must agree to sell
c) "Age" taken from date of issue of the latest Temporary Occupation Permit (TOP) or, if no TOP is issued, then the date of the latest Certificate of Statutory Completion is used
d) The agreement to sell must be in writing under a Sale and Purchase Agreement, which specifies the proposed method of distribution of the sale proceeds.
e) Not more than 3 persons must be appointed by the majority to act jointly as their authorised representatives
f) Majority need to give an undertaking to pay the costs of the Strata Titles Board
g) Majority need to consider the collective sale at an extraordinary meeting
h) Advertise the particulars of the application in four languages in the local newspapers
i) Send a copy of the proposed application to all subsidiary proprietors, mortgagees, charges, management corporation and place a copy under the main door of every unit
j) The notice should include a copy of the advertisement, the Sale and Purchase Agreement, a statutory declaration by the purchase on his relationship, if any, to the subsidiary proprietors, minutes of the EGM, and valuation reports on the price and method of distribution
k) Affix a copy of the notice to the main door of units whose subsidiary proprietors have not agreed to the sale
l) Affix a copy of the notice in the 4 official languages to a conspicuous part of each building
Q9: What actually happens before the approval of an en-bloc sale?

The Strata Titles Board will consider whether the sale was done in good faith and at arm's length. In order to determine whether the sale was conducted fairly, the Board will consider all the facts of the sale-such as the sale price, the distribution of the proceeds, and the relationship between the purchaser and any of the owners.

Q10: What are some examples of en-bloc sale not done in good faith?
An example is where owners of larger units agree on a certain method of apportionment which favours them and try to force the minority to agree to it. Other questionable methods include collusion between the majority owners and the developer; and sellers being coerced into a joint venture with the developer.
Q11: Under what other circumstances would a collective sale be blocked?

If the minority owners are likely to suffer a financial loss as a result of the sale going through, the Strata Titles Board may not allow the sale.

Q12: What happens if there are variations in a term that are not allowed for in the Agreement?

Any variation of a term that is not allowed for in the Agreement would require the assent of all the signatories.

Q13: What are the methods used to distribute sale proceeds?
The common methods used are:
a) Share value: the apportionment for each unit is proportionate to a unit's share value in relation to the total share value for the whole apartment
b) Average of the strata floor area and share value - the apportionment is according to the unit's strata floor area in relation to the total strata floor area. The figures derived from the share value method and floor area method are then averaged by taking 50% of each method
c) General valuation - a value is estimated for a typical unit of each type. This valuation is on an individual market basis, ignoring collective sale potential, floor level, facing etc.. The valuation of each typical type of unit would vary according to the floor area of each unit on the basis that the larger the unit, the lower the value per square foot. The apportionment for each unit would then be in proportion to that unit's value in relation to the total value for the whole development
d) The combination of general valuation and share value method - a value is estimated for a typical unit of each type as in (c), and the total value is computed. This total value is then deducted from the sale price, and the balance is distributed to each unit according to that unit's share value as a proportion of the total share value for the development
Q14: How can I ensure that the Development Charge for is unchanged for a site that is due for a review of the Development Charge?

Presently, the Development Charge can only be 'locked' upon the approval of the Provisional Permission. Therefore, you should consider this factor when bidding for the site.

 
 
 
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